# C_2013327EN.01004701.xml

| 12.11.2013 | EN | Official Journal of the European Union | C 327/47 |
| --- | --- | --- | --- |

12.11.2013

EN

Official Journal of the European Union

C 327/47

---

Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of non-financial and diversity information by certain large companies and groups’

COM(2013) 207 final — 2013/0110 (COD)

2013/C 327/10

Rapporteur: Ms PICHENOT

Ms PICHENOT

On 2 May 2013, the Council, and, on 21 May 2013, the Parliament decided to consult the European Economic and Social Committee, under Article 50(1) of the Treaty on the Functioning of the European Union, on the

Proposal for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of non-financial and diversity information by certain large companies and groups

Proposal for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of non-financial and diversity information by certain large companies and groups

COM(2013) 207 final — 2013/0110 (COD).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 27 June 2013.

At its 491st plenary session, held on 10 and 11 July 2013 (meeting of 11 July 2013), the European Economic and Social Committee adopted the following opinion by 95 votes to 31 with four abstentions.

1.   Conclusions

Conclusions

| 1.1 | The Committee welcomes the Commission's proposed amendments to the accounting directives concerning both disclosure of non-financial information and diversity on governing bodies. These limited amendments will help to improve the EU's corporate governance framework (1). |
| --- | --- |

1.1

The Committee welcomes the Commission's proposed amendments to the accounting directives concerning both disclosure of non-financial information and diversity on governing bodies. These limited amendments will help to improve the EU's corporate governance framework (1).

1

| 1.2 | The Committee recommends that the European Parliament and the Council take account of the balance achieved with these amendments, which increase transparency regarding environmental, social and corporate governance (ESG). The Commission's proposal constitutes a flexible and appropriate mechanism for improving communication with shareholders, investors, workers and other stakeholders. This proposal is targeted only at large companies, in order to avoid imposing additional burdens on smaller businesses. |
| --- | --- |

1.2

The Committee recommends that the European Parliament and the Council take account of the balance achieved with these amendments, which increase transparency regarding environmental, social and corporate governance (ESG). The Commission's proposal constitutes a flexible and appropriate mechanism for improving communication with shareholders, investors, workers and other stakeholders. This proposal is targeted only at large companies, in order to avoid imposing additional burdens on smaller businesses.

2.   Recommendations

Recommendations

| 2.1 | The Committee recognises that a balanced combination of the following elements will make it possible to provide shareholders at annual general meetings with non-financial information and to inform stakeholders in large companies. This set of requirements meets the stated objectives of transparency and consistency:






  — | substantive non-financial information is incorporated in the annual report; |
| --- | --- | --- |

2.1

The Committee recognises that a balanced combination of the following elements will make it possible to provide shareholders at annual general meetings with non-financial information and to inform stakeholders in large companies. This set of requirements meets the stated objectives of transparency and consistency:

balanced combination of the following elements

—

substantive non-financial information is incorporated in the annual report;

| — | this information relates inter alia to environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters; |
| --- | --- |

—

this information relates inter alia to environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters;

inter alia

| — | the information covers the company's policies in these areas, the results of those policies, the risks and uncertainties involved and how the company manages them; |
| --- | --- |

—

the information covers the company's policies in these areas, the results of those policies, the risks and uncertainties involved and how the company manages them;

| — | the mechanism covers all limited liability companies within the scope of the current accounting directives; |
| --- | --- |

—

the mechanism covers all limited liability companies within the scope of the current accounting directives;

| — | subject to a threshold such that it applies only to companies with more than 500 employees and either a balance sheet total of over EUR 20 million or a net turnover of over EUR 40 million, which exempts SMEs from the requirement; |
| --- | --- |

—

subject to a threshold such that it applies only to companies with more than 500 employees and either a balance sheet total of over EUR 20 million or a net turnover of over EUR 40 million, which exempts SMEs from the requirement;

| — | businesses can follow national, EU or international frameworks setting out principles and/or indicators as well as reporting guidelines; |
| --- | --- |

—

businesses can follow national, EU or international frameworks setting out principles and/or indicators as well as reporting guidelines;

| — | each business prioritises the information relevant to it; |
| --- | --- |

—

each business prioritises the information relevant to it;

| — | using the "comply or explain" method makes reporting mandatory but allows businesses some latitude where in their view the lack of information is justifiable; |
| --- | --- |

—

using the "comply or explain" method makes reporting mandatory but allows businesses some latitude where in their view the lack of information is justifiable;

| — | the flexibility of the instrument means that the administrative burden need not rise, particularly as it provides the option of continuing to produce a separate report that meets the same requirements and is an integral part of the annual report. |
| --- | --- |

—

the flexibility of the instrument means that the administrative burden need not rise, particularly as it provides the option of continuing to produce a separate report that meets the same requirements and is an integral part of the annual report.

| 2.2 | Given this degree of balance, the Committee feels that this would be a good time to adopt the proposal for a directive amending the accounting directives:






  — | at a time when civil societies are paying ever greater attention to businesses' impact on the community, when States and business communities are being expected to show greater transparency and when socially responsible investment is on the rise (2); |
| --- | --- | --- |

2.2

Given this degree of balance, the Committee feels that this would be a good time to adopt the proposal for a directive amending the accounting directives:

a good time

—

at a time when civil societies are paying ever greater attention to businesses' impact on the community, when States and business communities are being expected to show greater transparency and when socially responsible investment is on the rise (2);

2

| — | in a context where the Member States' national legislation and recommendations on non-financial reporting are still varied but are converging, where within the last ten years the international benchmarks by, for example, the OECD and the ILO were revised, and ISO 26000 was established, and where there has been ongoing refinement of tools for non-financial reporting such as those developed by the Global Reporting Initiative (GRI), the European Federation of Financial Analysts Societies (EFFAS), ratings agencies and corporate analysis bodies, as well as of sectoral benchmarks; |
| --- | --- |

—

in a context where the Member States' national legislation and recommendations on non-financial reporting are still varied but are converging, where within the last ten years the international benchmarks by, for example, the OECD and the ILO were revised, and ISO 26000 was established, and where there has been ongoing refinement of tools for non-financial reporting such as those developed by the Global Reporting Initiative (GRI), the European Federation of Financial Analysts Societies (EFFAS), ratings agencies and corporate analysis bodies, as well as of sectoral benchmarks;

| — | at a time when, at both European and international scale, the lessons learned from the financial, economic, social and environmental crises are increasing the need for transparency (3) concerning investment, taxation and anti-corruption measures, particularly in the extractive industries; |
| --- | --- |

—

at a time when, at both European and international scale, the lessons learned from the financial, economic, social and environmental crises are increasing the need for transparency (3) concerning investment, taxation and anti-corruption measures, particularly in the extractive industries;

3

| — | now that tools have been developed to quantify the environmental impact of productive activities, such as product life-cycle analysis, environmental footprint and calculating the cost of negative externalities; |
| --- | --- |

—

now that tools have been developed to quantify the environmental impact of productive activities, such as product life-cycle analysis, environmental footprint and calculating the cost of negative externalities;

| — | and now that some businesses are responding to the concerns of responsible consumers by providing more sustainable goods and services, for example by avoiding planned obsolescence and encouraging fair trade. |
| --- | --- |

—

and now that some businesses are responding to the concerns of responsible consumers by providing more sustainable goods and services, for example by avoiding planned obsolescence and encouraging fair trade.

| 2.3 | The Committee welcomes the fact that these amendments to the accounting directives open up new prospects, as they:






  — | move towards incorporating ESG issues into businesses' strategies and communications; |
| --- | --- | --- |

2.3

The Committee welcomes the fact that these amendments to the accounting directives open up new prospects, as they:

prospects

—

move towards incorporating ESG issues into businesses' strategies and communications;

| — | give shareholders' AGMs and responsible investment principles a more prominent role; |
| --- | --- |

—

give shareholders' AGMs and responsible investment principles a more prominent role;

| — | provide guarantees and degrees of flexibility that allow all businesses that see CSR as the microeconomic incarnation of sustainable development to commit to this progressive approach; |
| --- | --- |

—

provide guarantees and degrees of flexibility that allow all businesses that see CSR as the microeconomic incarnation of sustainable development to commit to this progressive approach;

| — | initiate a new approach to presentation and decision-making in business strategies, which focuses on the long term and strengthens the relationships between branches and the head of the group. |
| --- | --- |

—

initiate a new approach to presentation and decision-making in business strategies, which focuses on the long term and strengthens the relationships between branches and the head of the group.

| 2.4 | The Committee would draw the attention of the European Parliament and the Council to the following recommendations:






  — | companies should outline the positive or negative effects of their actions on society; |
| --- | --- | --- |

2.4

The Committee would draw the attention of the European Parliament and the Council to the following recommendations:

attention of the European Parliament and the Council to the following recommendations

—

companies should outline the positive or negative effects of their actions on society;

| — | companies should mention in their reports if there are workers' representatives on their boards; |
| --- | --- |

—

companies should mention in their reports if there are workers' representatives on their boards;

| — | bodies representing the workforce should be informed and consulted during the process of preparing the annual report; |
| --- | --- |

—

bodies representing the workforce should be informed and consulted during the process of preparing the annual report;

| — | the details in the ESG part of the report should be provided by specialists in the relevant fields, particularly with regard to the social and environmental aspects; |
| --- | --- |

—

the details in the ESG part of the report should be provided by specialists in the relevant fields, particularly with regard to the social and environmental aspects;

| — | contractors should provide information on their relationship with their supply chain or value chain, inter alia with regard to labour rights and human rights; |
| --- | --- |

—

contractors should provide information on their relationship with their supply chain or value chain, inter alia with regard to labour rights and human rights;

| — | businesses not subject to the directive could use this transparency-based approach on a voluntary basis to improve the way they operate; |
| --- | --- |

—

businesses not subject to the directive could use this transparency-based approach on a voluntary basis to improve the way they operate;

| — | Member States should incorporate the quality of non-financial reporting into their national CSR strategies; |
| --- | --- |

—

Member States should incorporate the quality of non-financial reporting into their national CSR strategies;

| — | when transposing the directive, Member States could, if they see fit, lower the stated thresholds to ensure that a significant number of the country's companies are included; |
| --- | --- |

—

when transposing the directive, Member States could, if they see fit, lower the stated thresholds to ensure that a significant number of the country's companies are included;

| — | the Commission should be invited to launch or facilitate a process involving "multiple stakeholders" (4) with a view to more effectively establishing guidelines and reference standards to facilitate comparability and, in the longer term, harmonisation; |
| --- | --- |

—

the Commission should be invited to launch or facilitate a process involving "multiple stakeholders" (4) with a view to more effectively establishing guidelines and reference standards to facilitate comparability and, in the longer term, harmonisation;

4

| — | in its own promotional and awareness raising CSR policies, as laid down in the October 2011 Communication, the Commission should recommend relevant companies to use those international benchmarks for guidance on disclosure of non-financial information which demonstrate most affinity with its new definition of CSR. |
| --- | --- |

—

in its own promotional and awareness raising CSR policies, as laid down in the October 2011 Communication, the Commission should recommend relevant companies to use those international benchmarks for guidance on disclosure of non-financial information which demonstrate most affinity with its new definition of CSR.

| 2.5 | The Committee endorses the proposed amendment to the fourth directive regarding the requirement to provide information on the diversity policy pursued by the company for its governing bodies. |
| --- | --- |

2.5

The Committee endorses the proposed amendment to the fourth directive regarding the requirement to provide information on the diversity policy pursued by the company for its governing bodies.

diversity policy pursued by the company for its governing bodies

| 2.6 | It would stress that this does not only involve administrative and supervisory boards, and that it may be worth extending the diversity policy to cover board committees such as the audit committee. |
| --- | --- |

2.6

It would stress that this does not only involve administrative and supervisory boards, and that it may be worth extending the diversity policy to cover board committees such as the audit committee.

| 2.7 | It points out that the ambitions regarding numbers of women on boards have not been achieved in most Member States (5). |
| --- | --- |

2.7

It points out that the ambitions regarding numbers of women on boards have not been achieved in most Member States (5).

5

| 2.8 | It believes that the diversity criteria should include the involvement of employee board members from the workplace, for example from the European Works Council, appointed by the trade unions. |
| --- | --- |

2.8

It believes that the diversity criteria should include the involvement of employee board members from the workplace, for example from the European Works Council, appointed by the trade unions.

| 2.9 | The Committee finally recommends that the Commission make this revision subject to a non-regression clause in respect of existing national legislation, and carry out an assessment of the impact of these amendments to the accounting directives on corporate practice as regards disclosing non-financial information, within five years of the entry into force of the directive. |
| --- | --- |

2.9

The Committee finally recommends that the Commission make this revision subject to a non-regression clause in respect of existing national legislation, and carry out an assessment of the impact of these amendments to the accounting directives on corporate practice as regards disclosing non-financial information, within five years of the entry into force of the directive.

3.   Contextual elements

Contextual elements

| 3.1 | The proposed amendments to the accounting directives follow on from the work done since the 2001 Green Paper on CSR (6), as supplemented by the communication in 2006 (7), and meet the commitments undertaken in the work plan in the communication from 2011 (8). These amendments are necessitated by the results of the impact assessment, showing the limited effectiveness of the non-financial information disclosed by businesses and largely fed by contributions from public consultation. The quality of the information is patchy, and not enough businesses are involved. |
| --- | --- |

3.1

The proposed amendments to the accounting directives follow on from the work done since the 2001 Green Paper on CSR (6), as supplemented by the communication in 2006 (7), and meet the commitments undertaken in the work plan in the communication from 2011 (8). These amendments are necessitated by the results of the impact assessment, showing the limited effectiveness of the non-financial information disclosed by businesses and largely fed by contributions from public consultation. The quality of the information is patchy, and not enough businesses are involved.

6

7

8

| 3.2 | The Commission stated its intention to improve companies' transparency concerning social and environmental issues in April 2011, in its communication on the Single Market Act. |
| --- | --- |

3.2

The Commission stated its intention to improve companies' transparency concerning social and environmental issues in April 2011, in its communication on the Single Market Act.

| 3.3 | In its opinion on information and measurement instruments for CSR (2005) (9), the Committee referred to the fourth directive on annual accounts, which includes a provision on non-financial information giving businesses the option of disclosing certain information on the social and environmental aspects of their activities. In 2012, the Committee supported the Commission's objective of increasing diversity on administrative and supervisory boards. In its 2012 opinion (10) on the communication on CSR, the Committee reiterated its support for mandatory reporting of non-financial information. |
| --- | --- |

3.3

In its opinion on information and measurement instruments for CSR (2005) (9), the Committee referred to the fourth directive on annual accounts, which includes a provision on non-financial information giving businesses the option of disclosing certain information on the social and environmental aspects of their activities. In 2012, the Committee supported the Commission's objective of increasing diversity on administrative and supervisory boards. In its 2012 opinion (10) on the communication on CSR, the Committee reiterated its support for mandatory reporting of non-financial information.

9

10

| 3.4 | The United Kingdom was the first Member State, in 1992, to introduce a corporate governance code (known as the Cadbury Code) (11) following the "comply or explain" principle. This approach was adopted, with variations in provisions, by other countries including Germany and Denmark. The flexibility of the method means that companies have a right to hold back information on certain sensitive issues, such as anti-corruption actions, that require a degree of discretion or even confidentiality in order to be effective. |
| --- | --- |

3.4

The United Kingdom was the first Member State, in 1992, to introduce a corporate governance code (known as the Cadbury Code) (11) following the "comply or explain" principle. This approach was adopted, with variations in provisions, by other countries including Germany and Denmark. The flexibility of the method means that companies have a right to hold back information on certain sensitive issues, such as anti-corruption actions, that require a degree of discretion or even confidentiality in order to be effective.

11

| 3.5 | Over the past decade, a number of Member States, including France, the Netherlands, the United Kingdom, Sweden and Spain, have adopted legislation aiming to create a national reporting framework with a view to harmonising European standards. |
| --- | --- |

3.5

Over the past decade, a number of Member States, including France, the Netherlands, the United Kingdom, Sweden and Spain, have adopted legislation aiming to create a national reporting framework with a view to harmonising European standards.

| 3.6 | A European agreement on transparency in the extractive industries was concluded under the Irish Presidency, which revises the Accounting Directive. The directive now requires country-by-country and project-by-project transparency regarding all payments made by European extractive and logging companies to the States where they operate. |
| --- | --- |

3.6

A European agreement on transparency in the extractive industries was concluded under the Irish Presidency, which revises the Accounting Directive. The directive now requires country-by-country and project-by-project transparency regarding all payments made by European extractive and logging companies to the States where they operate.

| 3.7 | In its resolution of February 2013 (12), the European Parliament acknowledged the importance of businesses divulging information on sustainability such as social and environmental factors, with a view to identifying sustainability risks and increasing investor and consumer trust. The EP called on the Commission to present a proposal on the disclosure of non-financial information by companies. |
| --- | --- |

3.7

In its resolution of February 2013 (12), the European Parliament acknowledged the importance of businesses divulging information on sustainability such as social and environmental factors, with a view to identifying sustainability risks and increasing investor and consumer trust. The EP called on the Commission to present a proposal on the disclosure of non-financial information by companies.

12

| 3.8 | In a context of crisis in which European public opinion is calling on businesses to act more ethically, CSR practices are acknowledged to be contributing factors in the European Union's trade and development policies and the implementation of the Europe 2020 strategy. They promote social and civil dialogue (societal dialogue), and should also improve understanding of the realities throughout the subcontracting chain. Disasters such as the collapse of the Rana Plaza building in Bangladesh are a reminder of the need to pay attention to the responsibility held by the client. |
| --- | --- |

3.8

In a context of crisis in which European public opinion is calling on businesses to act more ethically, CSR practices are acknowledged to be contributing factors in the European Union's trade and development policies and the implementation of the Europe 2020 strategy. They promote social and civil dialogue (societal dialogue), and should also improve understanding of the realities throughout the subcontracting chain. Disasters such as the collapse of the Rana Plaza building in Bangladesh are a reminder of the need to pay attention to the responsibility held by the client.

Brussels, 11 July 2013.

The President of the European Economic and Social Committee

Henri MALOSSE

---

(1)  The EU corporate governance framework, OJ C 24, 28.1.2012, p. 91.

1

(2)  Socially responsible financial products, OJ C 21, 21.1.2011, p. 33.

2

(3)  European company law and corporate governance, CES982/2013 - INT/678.

3

(4)  Employee involvement and participation, CESE 2096/2012 - SOC/470.

4

(5)  Gender balance on company boards, OJ C 133, 9.5.2013, p. 68-76.

5

(6)  COM(2001) 366 final.

6

(7)  COM(2006) 136 final and OJ C 286, 17.11.2005, p. 12.

7

(8)  COM(2011) 681 final and OJ C 229, 31.7.2012, p. 77.

8

(9)  OJ C 286, 17.11.2005, p. 12.

9

(10)  OJ C 229, 31.7.2012, p. 77.

10

(11)  "The financial aspects of corporate governance", 1 December 1992.

11

(12)  Resolution 2012/2098 (INI), rapporteur: Raffaele Baldassarre.

12

---

APPENDIX

to the opinion of the European Economic and Social Committee

The following amendment, which received at least a quarter of the votes cast, was rejected during the debate (Rule 54 (3) of the Rules of Procedure):

Replace opinion CES3548-2013_00_00_TRA_AS with the following:

1.   General comments

| 1.1 | The EESC considers the proposal for a directive to be superfluous (especially where compulsory disclosure of diversity policy is concerned), since it does not believe that further legislation is needed in this area on the European level. Generally speaking, the EESC does not see how the proposal delivers any essential added value compared with the present legislation and also fears a potential further increase in red tape. |
| --- | --- |

1.1

The EESC considers the proposal for a directive to be superfluous (especially where compulsory disclosure of diversity policy is concerned), since it does not believe that further legislation is needed in this area on the European level. Generally speaking, the EESC does not see how the proposal delivers any essential added value compared with the present legislation and also fears a potential further increase in red tape.

| 1.2 | For the EESC, transparency is part and parcel of modern company management. Europe's companies have demonstrated that they are sufficiently transparent within the current legislative framework. In Europe, social responsibility is a matter for businesses themselves, is part of company strategies and operates on a voluntary basis. Even at a time of crisis Europe's businesses have not compromised on levels of transparency and responsibility. |
| --- | --- |

1.2

For the EESC, transparency is part and parcel of modern company management. Europe's companies have demonstrated that they are sufficiently transparent within the current legislative framework. In Europe, social responsibility is a matter for businesses themselves, is part of company strategies and operates on a voluntary basis. Even at a time of crisis Europe's businesses have not compromised on levels of transparency and responsibility.

| 1.3 | The EESC is aware of the need on the part of some stakeholders and the public for greater transparency in company policy, particularly with respect to disclosure of social and environmental information. This applies especially to companies operating in third countries, such as mining companies in Africa (risks for the environment; risk of corruption), clothing companies in Asia (social sphere, human rights), and so on. |
| --- | --- |

1.3

The EESC is aware of the need on the part of some stakeholders and the public for greater transparency in company policy, particularly with respect to disclosure of social and environmental information. This applies especially to companies operating in third countries, such as mining companies in Africa (risks for the environment; risk of corruption), clothing companies in Asia (social sphere, human rights), and so on.

| 1.4 | The only added value discernible in the proposal is that it addresses the question of risk, how risks are defined and managed, and the obligation to report them. This could help companies to manage these risks and opportunities better and so take greater responsibility for the consequences of their operations in the non-financial sphere. Even here, however, it should be solely a matter for companies themselves to decide whether they wish to undertake this or not. |
| --- | --- |

1.4

The only added value discernible in the proposal is that it addresses the question of risk, how risks are defined and managed, and the obligation to report them. This could help companies to manage these risks and opportunities better and so take greater responsibility for the consequences of their operations in the non-financial sphere. Even here, however, it should be solely a matter for companies themselves to decide whether they wish to undertake this or not.

2.   Non-financial information

| 2.1 | The EESC is aware that improving transparency generally plays an important role in effective functioning of the single market. The ability to more easily compare information on how companies operate can help investors and shareholders make better decisions. |
| --- | --- |

2.1

The EESC is aware that improving transparency generally plays an important role in effective functioning of the single market. The ability to more easily compare information on how companies operate can help investors and shareholders make better decisions.

| 2.2 | The EESC considers that the present method and scope of disclosure of non-financial information are very good and fit for purpose. The mandatory disclosure now being proposed would constitute an unnecessary burden at odds with the proportionality principle. For this reason, the EESC would like the proposal to require disclosure only of truly relevant and meaningful information. This would avert any unnecessary increase in red tape for companies and would also mean the proposal had as much added value as possible for those using this information (investors, shareholders, employees, etc.). |
| --- | --- |

2.2

The EESC considers that the present method and scope of disclosure of non-financial information are very good and fit for purpose. The mandatory disclosure now being proposed would constitute an unnecessary burden at odds with the proportionality principle. For this reason, the EESC would like the proposal to require disclosure only of truly relevant and meaningful information. This would avert any unnecessary increase in red tape for companies and would also mean the proposal had as much added value as possible for those using this information (investors, shareholders, employees, etc.).

| 2.3 | The EESC would prefer companies to disclose non-financial information only of their own free will. Accordingly, it proposes the following change to Articles 1 and 2 of the proposal for a directive. |
| --- | --- |

2.3

The EESC would prefer companies to disclose non-financial information only of their own free will. Accordingly, it proposes the following change to Articles 1 and 2 of the proposal for a directive.

| 2.4 | According to the proposal, SMEs will not be required to disclose non-financial information, which matches the European Union's long-term goal of cutting red tape for businesses. |
| --- | --- |

2.4

According to the proposal, SMEs will not be required to disclose non-financial information, which matches the European Union's long-term goal of cutting red tape for businesses.

| 2.5 | The EESC believes that disclosure of non-financial information in the annual report and its verification by auditors as set out in the proposal is burdensome and difficult to understand, which will mean that a user's guide will have to be drafted. European legislation requires the auditor to comment on the consistency of the annual report with the annual accounts, at the same time requiring the annual report to include the annual accounts, the audit report and possibly further documents. Nevertheless, verification of non-financial information could be rather difficult and costly. Precisely what information must be disclosed in the annual report must be carefully specified, not least to avoid users of the report being overwhelmed by information that is not relevant. The EESC will promote publication of non-financial information in documents that are not subject to verification by audit. |
| --- | --- |

2.5

The EESC believes that disclosure of non-financial information in the annual report and its verification by auditors as set out in the proposal is burdensome and difficult to understand, which will mean that a user's guide will have to be drafted. European legislation requires the auditor to comment on the consistency of the annual report with the annual accounts, at the same time requiring the annual report to include the annual accounts, the audit report and possibly further documents. Nevertheless, verification of non-financial information could be rather difficult and costly. Precisely what information must be disclosed in the annual report must be carefully specified, not least to avoid users of the report being overwhelmed by information that is not relevant. The EESC will promote publication of non-financial information in documents that are not subject to verification by audit.

3.   Diversity

| 3.1 | The EESC considers the compulsory disclosure of diversity policy to be an unnecessary administrative burden lacking sound justification and any demonstrable benefits. Any requirement whatsoever on private entities to introduce a diversity policy, including imposing the requirement to publish a corporate diversity policy or explain why they have not done so, constitutes, in the view of the EESC, an unwarranted intrusion into the freedom to do business and the freedom of company owners to make their own decisions. As such it is rejected outright. Disclosure of company information should remain entirely a voluntary decision taken by the company itself as to whether such disclosure offers a competitive advantage or not. For a number of reasons, the EESC rejects disclosure of details concerning diversity policy. |
| --- | --- |

3.1

The EESC considers the compulsory disclosure of diversity policy to be an unnecessary administrative burden lacking sound justification and any demonstrable benefits. Any requirement whatsoever on private entities to introduce a diversity policy, including imposing the requirement to publish a corporate diversity policy or explain why they have not done so, constitutes, in the view of the EESC, an unwarranted intrusion into the freedom to do business and the freedom of company owners to make their own decisions. As such it is rejected outright. Disclosure of company information should remain entirely a voluntary decision taken by the company itself as to whether such disclosure offers a competitive advantage or not. For a number of reasons, the EESC rejects disclosure of details concerning diversity policy.

| 3.2 | Above all, it must be stressed that disclosure of diversity policy regarding the composition of a company's bodies bears no relation to its running and performance, as the explanatory memorandum erroneously states. The EESC takes the view that the owner(s) or shareholders of the company should decide who will run their company, what the management control mechanisms will be and what influence in these processes the members of the supervisory/management bodies will have. How companies operate is above all the responsibility of the owners and this includes bearing the risk of loss arising from bad businesses decisions. Artificially engineering the composition of supervisory or management boards can only interfere with a current set-up that is working well. |
| --- | --- |

3.2

Above all, it must be stressed that disclosure of diversity policy regarding the composition of a company's bodies bears no relation to its running and performance, as the explanatory memorandum erroneously states. The EESC takes the view that the owner(s) or shareholders of the company should decide who will run their company, what the management control mechanisms will be and what influence in these processes the members of the supervisory/management bodies will have. How companies operate is above all the responsibility of the owners and this includes bearing the risk of loss arising from bad businesses decisions. Artificially engineering the composition of supervisory or management boards can only interfere with a current set-up that is working well.

| 3.3 | On no account should the European Commission interfere in a company's decision making processes (such as the number of board members or their expertise, age or sex). The European Commission's appended analysis asserts a direct link between age, sex and other aspects and company performance. However, even if this were the case, this would not constitute any justification for authoritarian intervention in the composition of a company's management or supervisory bodies. |
| --- | --- |

3.3

On no account should the European Commission interfere in a company's decision making processes (such as the number of board members or their expertise, age or sex). The European Commission's appended analysis asserts a direct link between age, sex and other aspects and company performance. However, even if this were the case, this would not constitute any justification for authoritarian intervention in the composition of a company's management or supervisory bodies.

4.   Conclusions

In view of the arguments presented above, the EESC will:

| 1) | favour the disclosure of non-financial information being left, in line with the principle of subsidiarity, to the voluntary decision of companies themselves, or to the stipulation of disclosure requirements by national legislations; |
| --- | --- |

1)

favour the disclosure of non-financial information being left, in line with the principle of subsidiarity, to the voluntary decision of companies themselves, or to the stipulation of disclosure requirements by national legislations;

| 2) | recommend that paragraph 2 on diversity policies be deleted from Article 1 of the proposal for a directive, or – if this cannot be achieved – that the information published on diversity policy, including an explanation of why the company has not introduced such a policy, be left to the voluntary decision of the company itself or to national legislation. |
| --- | --- |

2)

recommend that paragraph 2 on diversity policies be deleted from Article 1 of the proposal for a directive, or – if this cannot be achieved – that the information published on diversity policy, including an explanation of why the company has not introduced such a policy, be left to the voluntary decision of the company itself or to national legislation.

Outcome of the vote

| Votes in favour | : | 37 |
| --- | --- | --- |
| Votes against | : | 96 |
| Abstentions | : | 2 |

Votes in favour

:

37

Votes against

:

96

Abstentions

:

2

---